Supply Chains and the Internalization of SMEs: Evidence from Italy

This paper explores the relevance of supply chains participation on firms’ probability to internationalize. It studies whether being part of a supply chains and/or of an international network increases the likelihood to enter international markets also for smaller and less productive firms. Our results support the view that belonging to a supply chain increases small firms’ probability of exporting as well as the intensive margin of trade. However, supply chain participation does not seem to affect the extensive margin, computed as the number of foreign markets served, coherently with the view that structural limits given by the size matter. The paper also explores the possibly differential effect of the supply chain for subcontractors and firms that produce their own-branded products and shows that the latter benefit more from integration.